Hasbro announces fourth-quarter profits fell more than expected

File photo by Mark M. Murray / The RepublicanEmployees of Hasbro Inc. work on an assembly line at the company's plant in East Longmeadow last summer. The company announced Monday that its fourth-quarter earnings for 2008 fell more than anticipated.

By MAE ANDERSON
Associated Press

NEW YORK - Hasbro Inc. announced Monday that its fourth-quarter profit fell a sharper-than-expected 30 percent as the nation's second-biggest toy maker cut prices on many items during the sluggish holiday season and the stronger dollar hurt results.

Hasbro's earnings report and Mattel Inc.'s last week indicate toy makers were not immune to the consumer spending drop-off that led to the weakest holiday season in decades.

Hasbro shares, which fell last week when Mattel reported its earnings, rose $1.88, or 8 percent, to $25.42 during morning trading. The stock has traded between $21.68 and $41.68 during the past 52 weeks.

"After a very strong performance in the first nine months of the year, the fourth quarter clearly had significant headwinds," Brian Goldner, Hasbro's president and chief executive, said during a conference call with investors.

The Pawtucket, R.I.-based maker of the Scrabble and Monopoly games and Playskool toys earned $93.6 million, or 62 cents per share, in the three months ended Dec. 28, down from $133.7 million, or 84 cents per share, a year earlier.

That missed the 75 cents per share analysts polled by Thomson Reuters, on average, expected.

Investors' expectations might have been muted by Mattel's weak earnings. The largest U.S. toy maker said its profit fell almost by half for the key fourth quarter on weak sales, including big drops in sales of Barbie and Hot Wheels.

"Investors might have been expecting a similarly disastrous quarter for Hasbro," said Needham & Co. analyst Sean MacGowan. "It was weak but not quite as disastrous."

Hasbro said that the stronger dollar reduced its revenue $80 million in the fourth quarter. Excluding that, revenue rose 1 percent during the quarter.

The company also slashed prices on high-priced holiday toys that weren't selling, such as Kota the Triceratops, which originally retailed for $249 but eventually sold for around $99. And it marked down slow-moving products such as toys tied into Indiana Jones and the Kingdom of the Crystal Skull and The Incredible Hulk movies.

"We took fairly aggressive actions to make sure that we cleared all of that out during the fourth quarter," David Hargreaves, chief financial officer, said during the call.

For the year, Hasbro's earnings fell 8 percent to $306.8 million, or $2 per share, compared with $333 million, or $1.97 per share, in the prior year. Annual sales rose to $4.02 billion from $3.84 billion.

The company predicted that, if there is not "material deterioration" in economic conditions, it expects to grow revenue and earnings per share in 2009. It also instituted a mid-single-digit price increase Feb. 1 to cover higher costs for labor in China and for commodities. Mattel instituted a similar increase in January.

In 2009, Hasbro expects toys tied to several action movies out this year to boost its revenue. They include X-Men Origins: Wolverine, due out May 1, and Transformers: Revenge of the Fallen on June 26 and G.I. Joe: Rise of the Cobra, coming Aug. 7.

The movie tie-ins should win Hasbro more shelf space as retailers highlight high-profile products, said Wachovia analyst Timothy Conder in a note to investors. He reiterated his prediction that the stock will outperform the market.

AP Business Writer Michelle Chapman in New York contributed to this report.